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In this note, several measures to evaluate the performance of a mutual fund are discussed, including Sharpe Ratio, Treynor Ratio, Jensen’s Measure, and Modigliani’s Measure. It is well known that investors can increase expected returns by assuming higher risk, and hence performance measures must incorporate the concept of risk.

A final year student of a business school estimated the net present value (NPV) of his proposed business plan using three different methods and encountered different valuation results. He approached the professor who had taught him valuation concepts in a finance course and wanted to know the reasons for the difference.

This note intends to clarify various discounted cash flow valuations and their usefulness. It examines how different methods analyze cash flow from different perspectives but finally arrive at an identical decision.

This note intends to clarify various discounted cash flow valuations and their usefulness. It examines how different methods analyze cash flow from different perspectives but finally arrive at an identical decision.